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Argentina’s oil and gas sector has been hampered by inconsistent government policy and ongoing economic challenges. However, since being elected in 2015, President Mauricio Macri has made moves to encourage investment, attracting big players like Statoil. Is the sector about to find its feet?

Argentina is a relative newcomer to deepwater offshore drilling, mostly because the potential for commercial finds in Argentina’s offshore Atlantic basins is, for now, largely unknown. State-owned energy company ENARSA, which held all offshore licences since 2006, has largely neglected them.

“The basins have not been recently studied using modern day geophysical acquisition or interpretation techniques and geologic concepts,” say IHS Markit principal technical researcher Jim Flanagan.

However, neglect may now be a thing of the past. In 2015, the Argentine Energy Secretariat forced ENARSA to relinquish around 90% of its total acreage holding. At the end of October 2016, Argentina’s state-controlled energy company YPF signed a deal with Norway’s Statoil to study potential offshore drilling sites in the Atlantic coast. The seismic tests will be undertaken in waters of 500m to 3,500m deep.

“The agreement will allow the parties to carry out joint studies in an area extending from the Argentine maritime boundary with Uruguay to 45 degrees south Latitude, covering some 360,000km2, in a basin where no other wells have been drilled,” says Flanagan.

Considering that the oil price is still relatively low compared to the lofty heights of two years ago (currently around $50 a barrel), it might seem an odd choice for Statoil to enter deepwater offshore Argentina, where there have not been any previous big discoveries.

However, Claudia E. Pessagno, senior oil and gas equity analyst for Latin America at IHS Markit. says Statoil’s announcement is in line with the company’s ongoing strategy.

“Statoil is one of the top deepwater explorers/operators in the world; therefore exploring offshore Argentina is in line with Statoil’s general strategy to pursue new deepwater opportunities around the world, no matter where they are.”

Official portrait of the President of Argentina, Mauricio Macri by Casa Rosada

Political difficulties

Operating in Argentina has been notoriously difficult for companies as they have been at the mercy of constantly changing policy and controversial governments.

A May 2016 report by the Wilson Center compares oil and gas policy in Argentina to that of a ‘pendulum swing’. “Management of the oil and gas industries in Argentina has been historically characterised by political and economic swings of the pendulum: from periods of investor-friendly policies to phases of government controls and market and price restrictions,” the report states.